Why Sunak was wrong to back Farage over NatWest

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A 25 per cent chance of survival is not a risk that any banker worth their salt would accept on a client loan application. But those are the career odds confronting the next chief executive of part-state-owned bank NatWest, following the departure of Alison Rose, the group’s third boss in four to be ousted by the UK government.

The ejections began in 2008, when Fred Goodwin was (rightly) turfed out of what was then Royal Bank of Scotland, having turned a once-proud institution into a vast, poorly controlled, cut-throat organisation for staff and customers alike. Goodwin was fired when the government rescued RBS in a £46bn bailout and later stripped of his knighthood.

In 2013, replacement boss Stephen Hester was ejected after falling out with ministers, mainly over the scale of his own pay, despite making good progress in fixing the group’s many complex problems.

After a relatively benign six years, during which amiable New Zealander Ross McEwan ran the bank before leaving on his own terms, Rose took the top job in 2019 — she worked her way up from NatWest graduate trainee. Well regarded in many quarters before last month, she suffered a swift fall from grace after mishandling a row with Nigel Farage, the rightwing firebrand whom the group’s wealth unit Coutts had decided to ditch as a client.

When the row first erupted via a series of Farage tweets beginning on June 29, the former Ukip leader pushed the line that his “debanking” was an example of a leftist establishment taking revenge on the man they blamed for Brexit. This seemed far-fetched, and far less plausible than the alternative explanation hinted at by NatWest: Coutts’ wealth threshold. If a customer fell below it, and was also a “politically exposed person” more costly to maintain due to constant risk assessments, then he or she would no longer be commercially viable.

The truth turned out to be somewhere in the middle. A Farage “subject access request” to obtain personal data from internal NatWest files relating to his account suggested his “xenophobic” and “racist” views had also been part of the decision-making, having been deemed “at odds with our position as an inclusive organisation”.

Rose was forced out (despite the backing of Natwest’s board), after admitting having steered the BBC to report, wrongly, that Farage’s account was being closed due solely to commercial reasons — a potential breach of client confidentiality.

Farage has triumphed once again as a campaigning man of the people, just as he did galvanising the Brexit vote seven years ago — this time fighting for the debanked masses from the paradoxical perch of a spurned customer of the elite Coutts brand. Last week, the Financial Conduct Authority, which regulates banks, told lenders they must submit data on how many customers had been debanked.

It will be distasteful to many that Farage has emerged as the hero and Rose as the villain in this affair. It is also unjust — both sides appeared disingenuous.

Fundamentally, though, the episode has caused huge damage to NatWest, some of it self-inflicted. Coutts’ risk managers were misguided to vet a customer’s political views. And Rose made a serious error of judgment in engaging in discussion, however tangentially, about a customer.

The board’s view, however, was that her years of sound judgments, which led to the bank shedding weak units, correcting pay excess and espousing fairer treatment of customers, outweighed the error and they backed her.

The government’s decision to over-rule the board — exceeding any influence that a 39 per cent shareholder should have — not only deprived the bank of an able CEO. It has also shaken investors. NatWest shares tumbled 12 per cent during the peak of the row, sharply underperforming peers.

So how was Farage able to secure the backing of Conservative MPs, right up to prime minister Rishi Sunak? The explanation echoes the decision by David Cameron to call the 2016 Brexit referendum. Pacifying the right has been the priority. Once again economic interests have been sublimated to political ones.

Earlier in the year, I wrote in favour of a rapid mass sell-off of the state’s remaining NatWest stake, arguing that one reason to do so was to counter “the real, perceived or prospective risk of ongoing political interference in the running of the bank”. It is unfortunate how soon that risk has materialised.

patrick.jenkins@ft.com